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Manmohan
vows broad
economic
reforms
14 Wednesday, May 20, 2009
Mitsubishi
UFG incurs
a $2.7bn
annual loss
Banks cancels cards sans ‘Chip and Pin’ feature
Forum calls for central bank
supervision of Islamic banks
Banks in the Kingdom are
cancelling debit and credit cards that
do not contain the advanced 'Chip and
Pin' security feature. The move is in
line with a Central Bank of Bahrain
(CBB) directive stipulating that all
such locally issued cards must be
Euro-pay Master Visa-compliant
(EMV) by June 30.
New microchip embedded cards
are currently being issued, which
makes it harder for unauthorised users
to access or copy private data.
“We are on the right track as all
Citibank Bahrain customers will get
the EMV-compliant or microchip
embedded cards by June 30,” said
Ashish Bhugra, Country Manager,
Citibank Bahrain.
“At Citibank we took the directive
to be EMV-compliant very seriously
and we will meet the CBB deadline,”
Bhugra added.
Chip cards are more secure, have
more applications and are more
convenient than the existing magnetic
stripe cards. Chip cards are fast
becoming the standard payment
technology across the world. In
addition, chip cards have much greater
capacity to store information and
programmes than the current magnetic
stripe technology.
“We are canceling all credit cards
carrying no microchips as part of our
nationwide drive,” another banker who
asked to remain anonymous told the
Bahrain Tribune.
“The banks are given instructions
by the CBB to replace all non-chip
credit, debit and other cards by June 30
this year,” the banker added.
“Though it's a gigantic task for
major banks to replace hundreds of
thousands of cards in a short span of
time we have no choice but to issue
new cards,” he said.
Chip and Pin technology uses an
embedded microchip to encrypt
information, making it more difficult
for unauthorised users to copy or
access the data on the card.
In the Middle East, the move
towards Chip and Pin technology is the
latest innovation in an evolving debit
and credit card payment environment.
In the West, the technology has
already been tested and proven in wide
use around the world and is quickly
becoming the new global standard for
enhanced safety and security.
Microprocessor cards contain
volatile memory and microprocessor
components. The card is made of
plastic, generally PVC, but sometimes
ABS. The card may embed a hologram
to avoid counterfeiting. Using smart-
cards also is a form of strong security
authentication for single sign-on
within large companies and
organisations.
The new chip card, the banker
added, works in a similar way like that
of existing magnetic stripe debit or
credit cards, as you swipe your card
and sign to authorise your transaction.
“Generally, instead of swiping, you
will ‘dip’ your card into the terminal,
where it will remain throughout the
payment process. The customer will
still be required to sign to authorise
their transaction,” he added.
Albaraka Turk Participation
Bank, a subsidiary banking unit
of the Kingdom-based Albaraka
Banking Group, said yesterday it
posted a net profit of $18.82
million for the first quarter of the
year, up by 13 per cent over the
corresponding period last year.
Total assets grew 11 per
cent, while liquid assets went
up 55 per cent. In addition,
finance and investments grew
by four per cent, deposits by 13
per cent and shareholders
equity by five per cent at the
end of the quarter compared to
last year-end.
Operating income increased
by 32 per cent to $62.04 million
as a result of increased finance
and investments. After
deducting all expenses, taxes
and provisions which the bank
has prudently increased in light
of the prevailing economic
conditions, net profit amounted
to $18.82 million, the bank said
in a statement yesterday.
Totalassetsincreasedto$3.18
billion at the end of the quarter.
This increase was invested in
enhancing liquid assets by 55
per cent to reach $860.98
million, which represents 32.14
per cent of the total deposits and
reflects the strong liquidity
position of the bank.
“The good financial results
reflect the bank's ability to deal
with economic conditions and
financial difficulties
experienced by the Turkish and
global markets,” said Adnan
Ahmed Yousif, Chairman of the
Board of Directors of Albaraka
Turk Participation Bank and
President and Chief Executive
of the Albaraka Banking Group.
“Thanks to its strong
resources and a wide network
of branches, the bank was able
to make the best of the current
conditions to expand its
investment and finance
portfolio and strengthen liquid
assets to safeguard against any
possible adverse consequences
arising from the crisis.”
A two-day annual Sharia conference
organised by the Accounting and
Auditing Organisation for Islamic
Financial Institutions (AAOIFI),
concluded yesterday at the Sheraton
Hotel with the attendance of over 370
international delegates.
The main topics addressed at this
year's conference included Sharia
perspectives on international non-Sharia
law being used as the governing law for
Islamic finance, the application of
systematic monetisation (Tawarruq) and
reverse Murabaha, the potential for
conflict of interest in Sharia Supervisory
Boards, as well as the current financial
crisis and its impact on the industry of
Islamic finance industry.
In addition to this, the conference
also focussed on additional and unique
requirements for the central bank
supervision of Islamic financial
institutions, the enhancement of Sharia
auditing and internal Sharia supervision
functions, the requirement and limitation
on financial derivatives development for
Islamic finance (Arboun, Salam, and
Debt Trading) and risk shifting
mechanisms in Islamic finance.
The conference was attended by
prominent Sharia scholars and industry
representatives. It was designed to
provide a platform through which the
Islamic finance industry can address
pertinent issues and promote a
harmonisation of global Sharia compliant
practices.
"Islamic finance is part of a rapidly
developing and expanding banking
sector. Consequently, its standards and
codes must also evolve while staying true
to its Sharia-compliant ethical
foundation. As an emergent business
sector, Islamic finance needs a guiding
body to give shape to the market and
define the characteristics of the industry,”
said KFH-Bahrain's Managing Director
and CEO Abdulhakeem Alkhayyat.
“KFH-Bahrain is always keen to
sponsor this annual conference, which
helps provide a stronger basis for the
continued development of the industry,”
he added.
"The AAOIFI took a great leap by
gathering the major financial institutions
to this conference to set new standards
and ethical codes for Islamic Financial
Institutions. The discussions held at the
conference were tailored to steer the
Islamic finance industry towards growth,
and this influence will be felt worldwide
as the concept of ethical banking
continues to develop and expand,
especially in the wake of the recent
global financial crisis,” Alkhayyat said.
The AAOIFI Sharia conference is
held each year to discuss the emerging
requirements and needs of Islamic
financial institutions around the world.
Bahrain’s $500 million sovereign Islamic
bond issue, which is due at the end of this month,
will be the first major sukuk deal in the Gulf this
year. The issue could act as a catalyst for
renewed interest in the sovereign as well as
corporate sukuk market of the Gulf region, a
study by international law firm Trowers and
Hamlins revealed yesterday.
“We believe that this first substantial deal
could help kick-start the Islamic debt market,
triggering a number of other new deals to follow
later this year if issuers become more confident
that they can attract investors,” affirmed Neale
Downes, Partner, Trower & Hamlins.
The average price of GCC corporate Islamic
bonds grew by 29 per cent since the regional
markets plummeted to their lowest in February
and the dramatic recovery in Islamic bond prices
reflected the rising market confidence in the
region, the report said.
“Activity is beginning to pick up and we are
now advising a number of funds and investment
banks on investment structures to invest in sukuk.”
Since the market's darkest day on February
11, the average yield on corporate GCC sukuk
has fallen from 17.2 per cent to 10.1 per cent and
the average credit spread over LIBOR has
narrowed from 1,414 to 763 basis points. In
comparison, the average price of US corporate
bonds remained virtually unchanged (falling two
per cent) over the same period.
Further, Downes said though the revival in
optimism was partially driven by the recent rally
in the world capital markets, confidence was
rising faster in the Gulf thanks to recovering oil
prices and the $10 billion bail out loan granted to
Dubai by the UAE central bank.
“The recent sharp rise in the average price of
GCC corporate sukuk has been fuelled by the
growing belief that corporate sukuk default risk
has been greatly reduced. Many corporate sukuk
are seen as effectively having a sovereign or
quasi-sovereign risk attached.”
“The bailout of Dubai has demonstrated
there is a great determination to control the
impact of any further economic shocks within
the region. The GCC governments do not want
to see a Lehman Brothers take place in the
Middle East. With governments standing so
strongly behind their economies, the perceived
risk of defaults in the Gulf is now far lower,
pushing down sukuk yields to much more
sensible levels.”
The report said State-linked companies have
benefited directly from the federal loan, which
has enabled them to resume the payment of
outstanding bills. “With governments also
actively helping companies refinancing loans
coming to maturity, this has helped decrease
corporate default risk.”
“Construction businesses, a large number of
which are government-owned, should
particularly feel the pressure ease as a result of
the bail-out. As property is often the chosen
underlying asset used to secure Islamic bonds,
improved optimism towards the property sector
will hopefully have a positive knock-on effect
on the sukuk market.”
RIYADH (AFP)
Saudi Arabia's crisis-hit banking sector has
choked off finance for major projects, forcing
the government to step in to foot the bill, experts
told an international conference yesterday.
"We have not seen major financing of
(private) projects last quarter and this quarter
(of 2009)," Abdullah Dabbagh, president of the
Ma'aden mining group, said.
"It's a really serious issue for some of these
projects," he told the Euromoney Saudi Arabia
Conference in Riyadh.
The government last year took over financing
of the multi-billion-dollar Mecca-Medina high-
speed railway amid failure to find private
funding for the project, said Yahya Al Yahya,
chief executive of Gulf International Bank.
The $5.5 billion Ras Al Zour water and
power generation project could face the same
fate, after the original bid winners failed to
come up with their own financing, Yahya told
the conference.
"The international banks have largely
withdrawn from the market," said Brad
Bourland, chief economist at Jadwa Investment.
And while local banks are in better shape
than their foreign counterparts, they do not have
the capacity to fund multi-billion-dollar
projects, he said.
Before the outbreak of the global financial
crisis, Saudi Arabia had mapped out a large list
of ambitious new economic cities,
petrochemical plants, railways, ports, power and
water projects for private investment.
But many of them have failed to take off due to
the global downturn. The government is already
spending heavily to boost growth and the
economy will likely expand slightly this year
despite a 10 per cent contraction in the oil sector
due to curtailed output and exports, Bourland said.
CBB move to check
credit card fraud
Mahmood Rafique
BANKING & FINANCE
PLUGGING LOOPHOLES: Ashish Bhugra.SAFE: A view of an Euro-pay Master Visa-compliant VISA credit card.
BUCKING THE TREND: Adnan Ahmed Yousif.
Albaraka Banking Group arm
posts $18mn net profit in Q1
K.V.S. Madhav
BANKING & FINANCE
GCC sukuk markets
to get a major fillip
K.V.S. Madhav
BANKING & FINANCE
FOR A COMMON GOAL: KFH-Bahrain's delegation to the AAOIFI (from left) Qusay Al Sabt, Faruq Silveira, Osama Taqi, Mohammed Ali,
Isa Duwaishan, Khalid Rafea and Sattam Al Gosaibi.
Mahmood Rafique
Banking & Finance
BurgerFuel signs pact for Bahrain foray
New Zealand based burger
restaurant franchise BurgerFuel said
yesterday it signed a master franchise
agreement with Saudi Arabia-based
Abdulla Fouad Group for a foray into
Bahrain and Saudi Arabia.
The agreement marks the second
Master Franchise deal for the company
outside Australasia, and will facilitate
the opening of outlets across Bahrain
and Saudi Arabia. The company,
however, did not specify the
investment volume.
“There is a lot of respect both ways
for making this deal work and we will
have a strong partner who could lead to
other opportunities. Saudi Arabia, with
a population of around 28 million,
should be a good market for us. The
region has a large majority of young
people, who want western concepts.
Convenience food has become a large
part of their culture,” said Josef
Roberts, Executive Director of
BurgerFuel.
Senior Business Reporter
Banks stop funding to
private Saudi projects

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EMV BT May 2009

  • 1. Page 16 Page 17 Manmohan vows broad economic reforms 14 Wednesday, May 20, 2009 Mitsubishi UFG incurs a $2.7bn annual loss Banks cancels cards sans ‘Chip and Pin’ feature Forum calls for central bank supervision of Islamic banks Banks in the Kingdom are cancelling debit and credit cards that do not contain the advanced 'Chip and Pin' security feature. The move is in line with a Central Bank of Bahrain (CBB) directive stipulating that all such locally issued cards must be Euro-pay Master Visa-compliant (EMV) by June 30. New microchip embedded cards are currently being issued, which makes it harder for unauthorised users to access or copy private data. “We are on the right track as all Citibank Bahrain customers will get the EMV-compliant or microchip embedded cards by June 30,” said Ashish Bhugra, Country Manager, Citibank Bahrain. “At Citibank we took the directive to be EMV-compliant very seriously and we will meet the CBB deadline,” Bhugra added. Chip cards are more secure, have more applications and are more convenient than the existing magnetic stripe cards. Chip cards are fast becoming the standard payment technology across the world. In addition, chip cards have much greater capacity to store information and programmes than the current magnetic stripe technology. “We are canceling all credit cards carrying no microchips as part of our nationwide drive,” another banker who asked to remain anonymous told the Bahrain Tribune. “The banks are given instructions by the CBB to replace all non-chip credit, debit and other cards by June 30 this year,” the banker added. “Though it's a gigantic task for major banks to replace hundreds of thousands of cards in a short span of time we have no choice but to issue new cards,” he said. Chip and Pin technology uses an embedded microchip to encrypt information, making it more difficult for unauthorised users to copy or access the data on the card. In the Middle East, the move towards Chip and Pin technology is the latest innovation in an evolving debit and credit card payment environment. In the West, the technology has already been tested and proven in wide use around the world and is quickly becoming the new global standard for enhanced safety and security. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram to avoid counterfeiting. Using smart- cards also is a form of strong security authentication for single sign-on within large companies and organisations. The new chip card, the banker added, works in a similar way like that of existing magnetic stripe debit or credit cards, as you swipe your card and sign to authorise your transaction. “Generally, instead of swiping, you will ‘dip’ your card into the terminal, where it will remain throughout the payment process. The customer will still be required to sign to authorise their transaction,” he added. Albaraka Turk Participation Bank, a subsidiary banking unit of the Kingdom-based Albaraka Banking Group, said yesterday it posted a net profit of $18.82 million for the first quarter of the year, up by 13 per cent over the corresponding period last year. Total assets grew 11 per cent, while liquid assets went up 55 per cent. In addition, finance and investments grew by four per cent, deposits by 13 per cent and shareholders equity by five per cent at the end of the quarter compared to last year-end. Operating income increased by 32 per cent to $62.04 million as a result of increased finance and investments. After deducting all expenses, taxes and provisions which the bank has prudently increased in light of the prevailing economic conditions, net profit amounted to $18.82 million, the bank said in a statement yesterday. Totalassetsincreasedto$3.18 billion at the end of the quarter. This increase was invested in enhancing liquid assets by 55 per cent to reach $860.98 million, which represents 32.14 per cent of the total deposits and reflects the strong liquidity position of the bank. “The good financial results reflect the bank's ability to deal with economic conditions and financial difficulties experienced by the Turkish and global markets,” said Adnan Ahmed Yousif, Chairman of the Board of Directors of Albaraka Turk Participation Bank and President and Chief Executive of the Albaraka Banking Group. “Thanks to its strong resources and a wide network of branches, the bank was able to make the best of the current conditions to expand its investment and finance portfolio and strengthen liquid assets to safeguard against any possible adverse consequences arising from the crisis.” A two-day annual Sharia conference organised by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), concluded yesterday at the Sheraton Hotel with the attendance of over 370 international delegates. The main topics addressed at this year's conference included Sharia perspectives on international non-Sharia law being used as the governing law for Islamic finance, the application of systematic monetisation (Tawarruq) and reverse Murabaha, the potential for conflict of interest in Sharia Supervisory Boards, as well as the current financial crisis and its impact on the industry of Islamic finance industry. In addition to this, the conference also focussed on additional and unique requirements for the central bank supervision of Islamic financial institutions, the enhancement of Sharia auditing and internal Sharia supervision functions, the requirement and limitation on financial derivatives development for Islamic finance (Arboun, Salam, and Debt Trading) and risk shifting mechanisms in Islamic finance. The conference was attended by prominent Sharia scholars and industry representatives. It was designed to provide a platform through which the Islamic finance industry can address pertinent issues and promote a harmonisation of global Sharia compliant practices. "Islamic finance is part of a rapidly developing and expanding banking sector. Consequently, its standards and codes must also evolve while staying true to its Sharia-compliant ethical foundation. As an emergent business sector, Islamic finance needs a guiding body to give shape to the market and define the characteristics of the industry,” said KFH-Bahrain's Managing Director and CEO Abdulhakeem Alkhayyat. “KFH-Bahrain is always keen to sponsor this annual conference, which helps provide a stronger basis for the continued development of the industry,” he added. "The AAOIFI took a great leap by gathering the major financial institutions to this conference to set new standards and ethical codes for Islamic Financial Institutions. The discussions held at the conference were tailored to steer the Islamic finance industry towards growth, and this influence will be felt worldwide as the concept of ethical banking continues to develop and expand, especially in the wake of the recent global financial crisis,” Alkhayyat said. The AAOIFI Sharia conference is held each year to discuss the emerging requirements and needs of Islamic financial institutions around the world. Bahrain’s $500 million sovereign Islamic bond issue, which is due at the end of this month, will be the first major sukuk deal in the Gulf this year. The issue could act as a catalyst for renewed interest in the sovereign as well as corporate sukuk market of the Gulf region, a study by international law firm Trowers and Hamlins revealed yesterday. “We believe that this first substantial deal could help kick-start the Islamic debt market, triggering a number of other new deals to follow later this year if issuers become more confident that they can attract investors,” affirmed Neale Downes, Partner, Trower & Hamlins. The average price of GCC corporate Islamic bonds grew by 29 per cent since the regional markets plummeted to their lowest in February and the dramatic recovery in Islamic bond prices reflected the rising market confidence in the region, the report said. “Activity is beginning to pick up and we are now advising a number of funds and investment banks on investment structures to invest in sukuk.” Since the market's darkest day on February 11, the average yield on corporate GCC sukuk has fallen from 17.2 per cent to 10.1 per cent and the average credit spread over LIBOR has narrowed from 1,414 to 763 basis points. In comparison, the average price of US corporate bonds remained virtually unchanged (falling two per cent) over the same period. Further, Downes said though the revival in optimism was partially driven by the recent rally in the world capital markets, confidence was rising faster in the Gulf thanks to recovering oil prices and the $10 billion bail out loan granted to Dubai by the UAE central bank. “The recent sharp rise in the average price of GCC corporate sukuk has been fuelled by the growing belief that corporate sukuk default risk has been greatly reduced. Many corporate sukuk are seen as effectively having a sovereign or quasi-sovereign risk attached.” “The bailout of Dubai has demonstrated there is a great determination to control the impact of any further economic shocks within the region. The GCC governments do not want to see a Lehman Brothers take place in the Middle East. With governments standing so strongly behind their economies, the perceived risk of defaults in the Gulf is now far lower, pushing down sukuk yields to much more sensible levels.” The report said State-linked companies have benefited directly from the federal loan, which has enabled them to resume the payment of outstanding bills. “With governments also actively helping companies refinancing loans coming to maturity, this has helped decrease corporate default risk.” “Construction businesses, a large number of which are government-owned, should particularly feel the pressure ease as a result of the bail-out. As property is often the chosen underlying asset used to secure Islamic bonds, improved optimism towards the property sector will hopefully have a positive knock-on effect on the sukuk market.” RIYADH (AFP) Saudi Arabia's crisis-hit banking sector has choked off finance for major projects, forcing the government to step in to foot the bill, experts told an international conference yesterday. "We have not seen major financing of (private) projects last quarter and this quarter (of 2009)," Abdullah Dabbagh, president of the Ma'aden mining group, said. "It's a really serious issue for some of these projects," he told the Euromoney Saudi Arabia Conference in Riyadh. The government last year took over financing of the multi-billion-dollar Mecca-Medina high- speed railway amid failure to find private funding for the project, said Yahya Al Yahya, chief executive of Gulf International Bank. The $5.5 billion Ras Al Zour water and power generation project could face the same fate, after the original bid winners failed to come up with their own financing, Yahya told the conference. "The international banks have largely withdrawn from the market," said Brad Bourland, chief economist at Jadwa Investment. And while local banks are in better shape than their foreign counterparts, they do not have the capacity to fund multi-billion-dollar projects, he said. Before the outbreak of the global financial crisis, Saudi Arabia had mapped out a large list of ambitious new economic cities, petrochemical plants, railways, ports, power and water projects for private investment. But many of them have failed to take off due to the global downturn. The government is already spending heavily to boost growth and the economy will likely expand slightly this year despite a 10 per cent contraction in the oil sector due to curtailed output and exports, Bourland said. CBB move to check credit card fraud Mahmood Rafique BANKING & FINANCE PLUGGING LOOPHOLES: Ashish Bhugra.SAFE: A view of an Euro-pay Master Visa-compliant VISA credit card. BUCKING THE TREND: Adnan Ahmed Yousif. Albaraka Banking Group arm posts $18mn net profit in Q1 K.V.S. Madhav BANKING & FINANCE GCC sukuk markets to get a major fillip K.V.S. Madhav BANKING & FINANCE FOR A COMMON GOAL: KFH-Bahrain's delegation to the AAOIFI (from left) Qusay Al Sabt, Faruq Silveira, Osama Taqi, Mohammed Ali, Isa Duwaishan, Khalid Rafea and Sattam Al Gosaibi. Mahmood Rafique Banking & Finance BurgerFuel signs pact for Bahrain foray New Zealand based burger restaurant franchise BurgerFuel said yesterday it signed a master franchise agreement with Saudi Arabia-based Abdulla Fouad Group for a foray into Bahrain and Saudi Arabia. The agreement marks the second Master Franchise deal for the company outside Australasia, and will facilitate the opening of outlets across Bahrain and Saudi Arabia. The company, however, did not specify the investment volume. “There is a lot of respect both ways for making this deal work and we will have a strong partner who could lead to other opportunities. Saudi Arabia, with a population of around 28 million, should be a good market for us. The region has a large majority of young people, who want western concepts. Convenience food has become a large part of their culture,” said Josef Roberts, Executive Director of BurgerFuel. Senior Business Reporter Banks stop funding to private Saudi projects